UNIVERSITY INSTITUTE OF LEGAL STUDIES

PANJAB UNIVERSITY,CHANDIGARH

In partial fulfilment of requirements for the syllabus of

B.ComLLB(Hons.) in the subject of

INDIAN ECONOMY (P-2)

(SEMESTER-III)

TOPIC OF THE PROJECT:-

INDUSTRIAL POLICY IN INDIA

SUBMITTED TO:- SUBMITTED BY:-

DR. GULSHAN KUMAR Bhuvesh Goyal

UILS, PU CHD. Roll no. 203/20

Section:-D
Session: 2021-22

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 ACKNOWLEDGEMENT
The success and final outcome of this project required a lot of
guidance and assistance from many people and I am extremely
fortunate to have got this all along the completion of my project.
Whatever I have done is only due to such guidance and I would
never forget to thank them.
I take this opportunity to record deep sense of gratitude to my
teacher Dr.GULSHAN KUMAR SIR , UILS, CHANDIGARH for
her incontestably perfect unmatched guidance, encouragement,
valuable suggestion and effort made during the preparation of this
project and during her lecture which enabled me to complete this
project successfully on the given topic:

INDUSTRIAL POLICY IN INDIA

I owe my regards to the entire faculty department of legal studies
from where I have learnt the basic of law and whose informal
discussions, intellectual support helped me in the entire duration
of this work.
Bhuvesh Goyal
B.com.LLB(hons.)
Semester:3, Sec:D
Roll No.203/20

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 CONTENTS
• INTRODUCTION……………………………………………….4
• OBJECTIVES OF STUDY……………………………………..5
• CRTICAL APPRAISAL OF INDUSTRIAL POLICY….....6-9
INDUSTRIAL POLICY,1948
INDUSTRIALPOLICY,1956
INDUSTRIAL POLICY,1973
INDUSTRIAL POLICY,1977
INDUSTRIAL POLICY,1980
• NEW INDUSTRIAL POLICY…………………………… 10-15
FEATURES
POSITIVE ASPECTS
NEGATIVE ASPECTS
• CONCLUSION………………………………………………16
• BIBLIOGRAPHY…………………………………………….17

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 iNTRODUCTION
During Independence, India's economy was plagued by serious
problems of illiteracy, poverty, low income per capita, industrial
decline, and unemployment. After India gained independence in
1947, a concerted effort was made in a period of industrial
development. The government adopted the laws and regulations
of various industries. This introduction of industrial policy has
proved to be a turning point in the history of Indian Industry.
Industrial policy is a text that sets the tone for implementation,
promoting the regulatory roles of government. It was an effort to
expand industrialization and grow the economy to its rightful place
and Demonstrated the Indian government's involvement in the
development of the industrial sector.
The policy also incorporates fiscal policy, monetary policy, the
tariff policy, labour policy and the Government’s attitude towards
the public and private sectors of the country. Before
independence there was no proper policy for determining
industrial development of the country. It is only after
independence a beginning has been made in this direction.
India's industrial policies were designed to protect its domestic
industries through import tariffs and infant industry subsidies.
Before 1947 the industrial base of the economy was very small
and the industries were base with many problems such as
shortage of raw materials, deficiency of capital, bad industrial
relations, etc. The investors were not sure about the industrial
policy of the new national government and the industrial (and
investment) climate was wrought with uncertainties and
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suspicions. The government of India launched the process of
industrial development after independence in 1947.

OBJECTIVES OF STUDY
➢The speed, pattern and structure of industrialization in the
country are strongly influenced by industrial policy. Industrial
policy contains a philosophy of determining the country's
industrial development pattern, procedures, principles, laws and
regulations governing industrial processes.

➢ Understand the state of the national economy

➢Differentiate with new techniques and analysis pros and cons

➢It is helpful for decision-making bodies to consider alternatives

➢ Understanding the new industrial policy of 1991

➢It will be useful for industrialists, shareholders as well the

general public to know more about industry statistics

➢Aspects of industrial needs will be very clear through critical

assessments

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CRITICAL APPRAISAL OF INDUSTRIAL
POLICIES (1948-1990)

Industrial policy of 1948

The first post-independence industrial policy was announced on

6th April 1948. Presented by Dr. Shyama Prasad Mukherjee
then acting Minister of Industry. The main purpose of this policy
was to accelerate industrial development by introducing a mixed
economy where the private and public sectors were recognized
as essential to economic development. It has seen the Indian
economy through social patterns. The major industries are divided
into four categories:
Industries with special State Monopoly / Strategic industries:
Included industries that do the work of atomic energy, railways
and weapons, and ammunition.
State-owned enterprises: This category included nationally
important industries. 18 such categories are listed in this category
as fertilizers, heavy machinery, protective equipment, heavy
chemicals, etc.
Multi-sectoral industries: This category included industries that
were allowed to operate independently in the private or public
sector. The government was allowed to review the situation in
order to obtain any private liability that exists.

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Private Industry: Industries not mentioned in the above
categories fall into this category. Priority was given to small
businesses and small industries, which led to the use of local
resources and job creation.

Industrial policy 1956

This second industrial policy was announced on April 20, 1956,
replacing the 1948 policy. Features of this policy were:

• A new category of industry.

• Non-discriminatory and fair treatment in the private sector.
• Promotion of village and small industries.
• Achieving progress by eliminating regional inequality.
• Welfare of employees.
The IRDA divides industries into three categories:
Schedule A industries: Industries that have been under state or
federal government. It included 7 industries. The private sector is
also introduced to these industries if there is a national interest.
Schedule B industries: At this industrial stage, the state was
allowed to establish new units but the private sector was not
barred from establishing or expanding existing units e.g. chemical
industries, fertilizers, synthetics, rubber, aluminum, etc.
Schedule C industries: Therefore the industries that were not
part of the above-mentioned industries form part of the Schedule
C industries.
In summary, the 1956 policy in which the state was given a
key role in industrial development as money was scarce and
business was powerless.
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INDUSTRIAL POLICY, 1973
The 1973 Industrial Policy Statement identified the leading
industries with investments in industrial estates and foreign
companies were approved. Large industries were allowed to start
working in the rural and backyards with the aim of developing
those areas and enabling small industries to grow. The key
elements of the Indian Policy Statement were therefore:

• The policy was aimed at eliminating distortion, providing for

closer cooperation between agriculture and industry.
• Priority was given to the production and transmission of
power.
• The list of industries assigned to the sub-sector is expanded.
• A special law was enacted to protect small houses and
indoor industries were introduced.

INDUSTRIAL POLICY, 1977

The Industrial Policy of 1977 was announced by George
Fernandes who was then the minister of trade unions in
parliament. The highlight of this policy is:
A] Aimed at developing small and medium enterprises.

• Household and cottage industries for self-employment.

• Small sector investment up to 1 lakhs.
• Small investment industries up to 1-15 lakhs.
B] Large sector

• Basic industries: infrastructure and small and rural

industrial development.
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 • Large furniture industry: to meet the needs of the small
housing industry.
• Advanced technology industries: agricultural development
and small industries such as petrochemicals, fertilizers and
pesticides.
C] Limit the management of large business houses.
D] The role of the public sector:

• Development of auxiliary industries.

• Making technology accessible to technology and
management in small and medium enterprises.
E] Rehabilitation of sick units.

INDUSTRIAL POLICY, 1980

The CONGRESS government announced this policy on July 23,
1980. The features of this policy are:

• Promotion of equitable growth.

• Extension and simplification of automatic expansion.
• Taking sick units in the industry.
• Control and control of unauthorized overproduction power
installed in industrial housing.
• Redefining the role of sub-units.
• Improving the functioning of the public sector.

NEW INDUSTRIAL POLICY, 1991

The long-awaited industrial policy was announced by the
Government of India on 24 July 1991. There are several
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significant departures from the latest policy. The New Industrial
Policy lifted the MRTP corporate asset limit and eliminated the
industrial authorization for all projects, with the exception of 18
(now 5) groups. It has increased the level of foreign exchange
participation in the country's industrial zone.
The new policy has eliminated all unnecessary management
controls for industrial growth. The new policy also clarified the role
of the public sector and called on private companies to operate
even in those areas that have been reserved for the public sector
so far.
Therefore, the new policy recognizes that large and private
enterprises as well as foreign companies and multinational
corporations (MNCs) are no longer "afraid" and, in fact, do not
keep pace with the growth of the country's industries. However,
the new policy decides to take a series of measures regarding
policies related to the following areas: (a) industrial licensing, (b)
MRTP Act, (c) public sector policy, (d) foreign investment, and (e)
foreign technology agreements.

FEATURES OF NEW INDUSTRIAL POLICY

1. ABOLISHING INDUSTRIAL LICENSING:- In order to liberate
the economy, there was a need for the termination of the
industrial license with the exception of 18 industries that required
a Compulsory License.
Over time this has been reduced to 14, then 9 and later 8 and
now the 5 industries that require compulsory licenses are as
follows: -

• Immersion and boiling of alcoholic beverages

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 • Cigarettes and tobacco substitutes
• Harmful Chemicals, Drugs and Drugs
• Electronics aerospace and defense equipment
• Industrial explosives - including explosive devices, safety
fittings, guns, nitrocellulose and matches.
2. ROLE OF PUBLIC SECTOR:- Despite the huge investment in
the public sector, there was a need to redefine the role of the
public sector. The number of industries set aside for the public
sector has been reduced from 17 to 8 to 6. The six industries are
as follows: -
a) Protective products
b) Mineral oils
c) Atomic energy
d) Railways
e) Coal and lignite
f) Minerals
(3) Foreign investment: Previously it was necessary for every
industry to obtain government approval earlier which led to
unnecessary delays and sometimes due to frustration by foreign
investors not investing to encourage the export of Indian goods to
the world market unconditional permission was granted under the
new 1981 industrial policy. FDI reaches 51% in leading industries.
(4) MRTP Act: The new industrial policy of 1991 removes the
asset limit in respect of MRTP companies this eliminates the
company from the previous central government approval to
expand, establish new industries, mergers etc.
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(5) External technology:
(i) Automatic approval of foreign technology agreement for key
industries up to 1 crore 5% of foreign trade profits 8% of
exports
(ii) There is no permit to hire foreign specialists
(6) Convertibility of Rupee: The new industrial policy of 1991
granted industry rights regarding the importation of raw materials
and technology. The new policy introduces the rupee flexibility in
the current account and cash account. The government has made
the current account fully flexible, while under the cash account the
repayment of loans and the withdrawal of assets have been made
adjustable. In addition, under previous provisions the financial
institution that transfers loans from industrial estates had the
option to convert their 20% debt into equity into a major threat to
industry by putting a threat on their positions. Under the new
industrial policy such as a mandatory clause for the conversion of
loans to equity has also been abolished.
(7) Small Business Reservations: In 2006, smaller units were
defined as a unit with an investment of 5 Cr. In industry and
machinery .In October 2008, 21 items were reserved for
production in small scale industries.
(8) Background Industrial Promotion: Government has taken
various steps to promote backlash industries. The government will
provide various compensation to the back-end industry by
reducing regional disparities.
(9) Freedom from Management: Extension programs introduced
by the government are free from administrative control and

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existing units will be free to produce any goods on the basis of a
license already issued.

POSITIVE ASPECTS OF NEW INDUSTRIAL POLICY

1. Creating Competition in India Industries: - A new industrial

policy is undoubtedly in demand credit for creating and promoting
competitive economic conditions in the Economy. Includes:

• The New Industrial Policy almost eliminates all forms of

protection provided by the domestic industry.
• Open up private investment investments previously
reserved investment in the public sector only.
• The new industrial policy has also liberated local practice
and re-imported it of technology without government
restrictions.
• Process delays have been removed which has resulted in
a reduction in project costs.
2. Attract FDI: - Under the new policy the government has
divided the environmental governance of public sector units by
attracting private and foreign funds to enter the industries, which
were previously reserved for the public sector. Currently, in
priority industries no pre-government approval is required for FDI
Upto 51%.
3. Technology Implementation in India: -The process of
importing technology into India has been simplified by granting
automatic permissions to key industries to remove unnecessary
delays that have hampered the decision-making process
regarding technology imports.

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4. International Quality Improvement in India: The aim of the
New Industrial Policy was to focus on improving the quality of
international quality in India in order to improve the quality of
production in all aspects .To improve exports and bring about
global competitiveness in the Indian industry.
5. Removal of MRTP Act: Removal of restrictive provisions of the
MRTP Act such as pre-term consideration of MRTP commission
investment decision, pre-approval of expansion center, new job
creation. The consolidation, consolidation, acquisition and
provision of the appointment of an External Director will
strengthen those units.
6. Removal of FERA Conflict Conditions: The Industrial Policy
has eliminated almost all of FERA's restricted provisions. The
abolition of FERA was a great help to the industries that carry out
export operations.
7. Consumer Development in India: New Industrial Policy shifts
the role of state from natural control to governance. Under the
new Industrial Policy the state must create competitive economic
conditions to enable the industry to be accountable to society.

NEGATIVE ASPECTS OF NEW INDUSTRIAL POLICY

1. Extra Years of Foreign Investment: New Industrial Policy

puts more emphasis on FDI in India. In fact, FDI viewed it as the
solution to all of the country's social and economic problems. It is
envisaged that direct foreign investment approvals will be granted
for up to 51% of foreign direct investment in key industries. H.K.
Para jape has agreed that the 34 most important industries, with
automated foreign investment licensing provisions, will make it
possible for large multinational corporations to control certain
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growing areas of our country if the same number of benefits and
permits are granted to the indigenous industry. houses then better
results can be expected without taking the risk of foreign
exchange.
2.Domestic Resources Exploitation: - Natural resources are
limited. Each country in the world, developing or developing, aims
to make full use of the resources available for growth and
development in the world. Critics of the New Industrial Policy are
of the view that the provision of large foreign exchange reserves
will lead to the waste and misuse of locally available resources
.International companies have large marketing and financial
resources. They have the latest technology and great production
power. MNCs will use their natural resources to produce sub-
category products for the global market. It leads to the immediate
depletion of the country's existing resources.
3. Environmental Threat: - Environmental laws in all developed
countries around the world are strict and violations lead to serious
industrial consequences. On the other hand, environmental laws
in developing and less developed countries and their application
also do not apply. In addition, developing lands are victims of
corruption, bias, and other evils.
4. Decreasing growth in industrial production: -The worst sign
against industrial policy is a sudden decline in industrial growth. In
the early years of freedom the growth of industrial assets showed
negative figures.

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 CONCLUSION
Industrial policies in India have taken a shift from the Socialistic
pattern especially in 1956 to the Capitalist since 1991. India now
has a more liberal industrial policy regime focused on foreign
investment and smaller regulations. India is ranked 77th in the
World Bank Business Report 2018. Changes related to the non-
monetary policy (Liquidation and Nonpayment Act, 2017) and
Property and Services Tax (GST) are positive and will lead to
long-term benefits for the industrial sector.
Campaigns such as Make in India and Start up India have helped
to improve the country's business ecosystem. However,
shortages of electricity and high prices, debt, high unit costs due
to labor laws, political interference and other regulatory
responsibilities continue to be challenges to the strong growth of
the industrial sector in India.
There is a need for a new Industrial Policy that will improve the
manufacturing sector in the country. The government in
December 2018 also saw the need to introduce a new Industrial
Policy that would be a roadmap for all businesses in the country.
The conclusion can be noted that the New Industrial Policy
(1980) is largely driven by growth considerations. The policy
released licenses for businesses large and small, he wanted to
promote large industries at the expense of smaller units. The
policy therefore favors a costly approach to development and
paves the way how to expand large and large industrial housing.

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 BIBLIOGRAPHY
1. Dutt, R.& Sundaram, Indian economy (latest edition) New
Delhi, S Chand and Co.
2. Mishra, SK and puri, VK Indian economy (latest edition)
New Delhi, Kalyani Publishers
3. Indian economy by TR Jain
4. Dhar, P. K. Indian Economy: Its Growing Dimensions
WEBSITES

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